Agency

Question 1

Liability in K

Answer 1

P becomes liable to TP through the actions of is A if A and P both CONSENT and A is subject to P’s CONTROL

P must have contractual capacity, but A does not

Agency law requires no writing, but SOF may

No consideration required

MUST exist when A enters a K

Question 2

Actual Authority

Answer 2

Creation

• Express = P tells A to act on P’s behalf
• Implied = P’s conduct leads A to believe A has authority

Termination

• after a specified time/event or a reasonable time
• change of circumstances (e.g., subject matter is destroyed)
• A acquired adverse interest (e.g., joins a competitor)
• when A says so (because agency is consensual)
• when P says so, UNLESS it’s coupled with an interest–then agency is irrevocable (e.g., a lien on property as collateral; fee or commission is NOT an interest)
• death/incapacity/bankruptcy UNLESS with interest

Delegation = OK if P consents (express or implied)

Question 3

Substitutes for Actual Authority: Apparent Authority

Answer 3

P leads TP to mistakenly believe A has authority

TP’s reasonable belief must be created by P, not A alone

Problem = can linger after actual authority ends (difficult to destroy)

Question 4

Substitutes for Actual Authority: Ratification

Answer 4

Even if A had no authority, P can ratify by

(1) expressly affirming the K
(2) accepting the benefit of the K
(3) suing TP on the K

P must have knowledge of all MATERIAL facts

P must ratify the ENTIRE transaction

P must have capacity (1) at time of ratification AND (2) at time of the original K because ratification is RETROACTIVE (so A/promoter who enters into K on behalf of corp. not yet formed = NO ratification because corp. didn’t exist at time of K)

Since retroactive, must protect intervening rights of BFP

Question 5

Substitutes for Actual Authority: Adoption

Answer 5

Once K is formed, P can ALWAYS adopt the K as its own

NOT retroactive = liability begins from adoption forward

A is still liable too!

Question 6

Principal-Agent Relationship

Answer 6

• A is fiduciary = owes P duties of LOYALTY (must put P’s interests above her own), CARE (“sliding scale” depending on any special skills A may have), and OBEDIENCE (P is in control of A)

P MUST pay (unless gratuitous), reimburse and indemnify A

Remedies: broad!

Question 7

Principal-TP Relationship

Answer 7

P is ALWAYS liable to TP

TP is ALMOST ALWAYS liable to P unless A has special skills AND TP does not know P exists (undisclosed P)

*No liability b/t A and TP (A is just go-between)

Question 8

Liability in Tort

Answer 8

Test = was a tort committed by a servant (someone P had control over, as opposed to an independent contractor) acting within the scope of employment?

If YES = master and servant (P and A) are joint and severally liable

Scope of Employment

• Usual task = within scope
• Detour = minor deviation usually within scope
• Frolic = substantial deviation usually outside scope

Intentional Torts = Servant’s intentional torts are outside scope UNLESS (1) force is used to further master’s business, (2) master ratifies use of force, or (3) master authorized servant to commit tort

Master/P is liable for its own negligence if he fails to properly train or supervise employees or check an employee’s criminal record or job history